Neuronal and retinal tissue are high in phospholipids containing either one or two polyunsaturated acyl chains. Our studies have led to the development of a novel model for phospholipid acyl chain packing, which involves the formation of dynamic lateral domains in the surface of the membrane. Differential scanning calorimetry (DSC) of mixtures of a disaturated (di16:0) phospha-tidylcholine (PC) and a dipolyunsaturated (di22:6n3) PC were studied. These lipids show poor miscibility in the liquid crystalline (LC) phase and demonstrate lateral phase separation in the gel phase. Fluorescence lifetime and anisotropy measurements, using the probe diphenylhexatriene (DPH), also indicates the presence of lateral heterogeneity in the membrane surface in both the gel and liquid crystal states. These studies support the presence of clusters or domains in mixtures of mixed chain and dipolyunsaturated phospholipids, as exist in both synaptosomal and retinal membranes. The propensity to form domains increases with increasing levels of acyl chain unsaturation, with 22:6n3 acyl showing the greatest level of domain formation. Both DSC and fluorescence data demonstrate that cholesterol preferentially interacts with saturated acyl chains and would, therefore, tend to concentrate in the more saturated regions of the membrane where it would effect both the size and lifetime of the domains. These findings have potentially important implications for integral membrane protein function. Domain formation would create regions of the membrane rich in highly unsaturated acyl chains. Proteins located in these regions would have different functional properties than those in more saturated regions of the membrane. Many neurotransmitter receptors and visual pigments are members of the G protein coupled-receptor family and reside in membranes containing very high levels of polyunsaturated acyl chains where domains of the type described are likely to occur. DSC measurements indicate that polyunsaturated phospholipids are more sensitive to the perturbing nature of ethanol. Therefore, the formation of highly unsaturated domains could result in regions of the synaptosomal membranes which are particularly sensitive to alcohols and other membrane soluble agents. Fluorescent probes have been widely used to characterize the acyl chain packing properties of lipid bilayers in both model and biological membranes. We have extended the analysis of the time-resolved anisotropy decay of one of the most commonly used probes, DPH, to allow a measure of the acyl chain packing order in the membrane interior vs the portion of the chain closer to the interfacial region. These data complement the information from NMR and characterize the time averaged properties of the ensemble of molecules making up the bilayer. This analysis allows a more refined discrimination of the packing properties of phospholipid acyl chains and their interaction with cholesterol.